Gross Margin
Profit left after the direct cost of making the product
Definition
Gross margin is revenue minus cost of goods sold, as a share of revenue. It is the first look at pricing power before operating expenses, interest, and tax.
Gross Profit ÷ Revenue
Example
A 48% gross margin means 52 cents of every dollar go to making or sourcing the product, and 48 cents remain to cover everything else.
Typical range
Software: 70%+; hardware: 30 to 50%; grocery: often under 30%